REG - Evraz Plc - EVRAZ Q2 2018 TRADING UPDATE

EvrazAnnouncement

26/07/2018 07:05

RNS Number : 7965V
Evraz Plc
26 July 2018
 


EVRAZ Q2 2018 TRADING UPDATE
26 July 2018 - EVRAZ plc (LSE: EVR; "EVRAZ" or the "Group") today released its trading update for the second quarter of 2018.
Please note that Q1 2018 production and sales volumes data have been updated due to adjustments in intragroup sales and coal classification. See the respective notes below the tables on pages 2, 4 and 7 for details.
 
Q2 2018 vs Q1 2018 HIGHLIGHTS:
 
·      In Q2 2018, EVRAZ' consolidated crude steel output grew by 3.9% QoQ to 3.5 million tonnes, primarily due to higher pig iron production.
·      Sales of finished products rose by 10.3%, primarily attributable to stronger domestic demand for construction and railway products, as well as improved market demand in North America. This was partly offset by a 7.8% decrease in sales of semi-finished products, reflecting a change in the sales mix.
·      Production of raw coking coal fell by 9.2% QoQ to 5.4 million tonnes mainly following scheduled transition of production at Raspadskaya mine from three to two longwalls.
·      Coking coal product sales climbed by 6.3% QoQ, mainly due to the completion of a longwall repositioning at the Uskovskaya mine and improved weather, which positively affected raw coal shipments.
·      External sales of iron ore products dropped by 13.2% QoQ amid higher consumption of pellets by EVRAZ NTMK after the launch of blast furnace no. 7.
·      Sales of vanadium products rose by 7.7% QoQ, mainly due to sales brought forward from H2 2018 to Q2 2018 to take advantage of strong market conditions.




 



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018/ Q1 2018, change


H1 2018


H1 2017


H1 2018/ H1 2017, change




Total crude steel production


3,481


3,351


3.9%


6,832


6,990


-2.3%




Russia


2,996


2,730


9.7%


5,726


5,742


-0.3%




Ukraine


-


154


-100.0%


154


388


-60.3%




North America*


485


467


3.9%


952


860


10.7%




Total raw coking coal mined


5,422


5,969


-9.2%


11,391


11,651


-2.2%




Total coking coal concentrate

production


3,907


4,154


-5.9%


8,061


7,217


11.7%




Iron ore products production


3,424


3,431


-0.2%


6,855


6,894


-0.6%


































Total sales of steel products**


3,148


3,068


2.6%


6,216


6,550


-5.1%




Semi-finished products**


1,202


1,303


-7.8%


2,505


2,932


-14.6%




Finished products


1,946


1,765


10.3%


3,711


3,618


2.6%




Total sales of third-party steel

products


247


170


45.3%


417


370


12.7%




Sales of coking coal products** 


2,885


2,713


6.3%


5,599


4,686


19.5%




Sales of iron ore products


508


585


-13.2%


1,093


1,416


-22.8%




Sales of vanadium final products***


3,348


3,108


7.7%


6,456


8,123


-20.5%



Note. Numbers in this table and the tables below may not add up to totals due to rounding.
* The Q2 2018 production and sales volumes of Evraz North America are preliminary.
** The Q1 2018 data have been updated due to adjustments in intragroup sales. In addition, the data for the following reporting periods have been restated: for Q1 2017, Total sales of steel products = 3,189, Semi-finished products = 1,497; for Q4 2017, Total sales of steel products = 3,346, Semi-finished products = 1,674.
*** in tonnes of pure vanadium
 




 
STEEL SEGMENT
 
Total production volumes (RUSSIA and UKRAINE)



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


H1 2018 / H1 2017, change




Pig iron production


2,681


2,571


4,3%


5,252


5,689


-7,7%




EVRAZ ZSMK


1,515


1,397


8,4%


2,912


2,777


4,9%




EVRAZ NTMK


1,166


1,020


14,3%


2,186


2,423


-9,8%




EVRAZ DMZ


0


153


-100,0%


153


489


-68,7%




Crude steel production


2,996


2,884


3,9%


5,880


6,130


-4,1%




EVRAZ ZSMK


1,962


1,790


9,6%


3,752


3,597


4,3%




EVRAZ NTMK


1,034


940


10,0%


1,974


2,145


-8,0%




EVRAZ DMZ


0


154


-100,0%


154


388


-60,3%




Iron ore products production


3,424


3,431


-0,2%


6,855


6,894


-0,6%




Pellets (EVRAZ KGOK)


1,626


1,651


-1,5%


3,277


3,182


3,0%




Sinter (EVRAZ KGOK)


904


831


8,8%


1,735


1,766


-1,8%




Concentrate saleable (Evrazruda,  EVRAZ KGOK)


894


949


-5,8%


1,843


1,946


-5,3%




Coking coal concentrate production


518


522


-0,8%


1,041


986


5,6%




From own raw coal*


319


282


13,1%


601


425


41,4%




From third-party raw coal


199


240


-17,1%


440


561


-21,6%




Gross vanadium slag production**


4,394


4,020


9,3%


8,414


9,348


-10,0%













Note. Numbers in this table and the tables below may not add up to totals due to rounding.
*  from Coal segment
** in tonnes of pure vanadium
 
In Q2 2018, EVRAZ' pig iron output at its Russian mills grew by 4.3% QoQ to 2.7 million tonnes. This was primarily driven by a low-base effect caused mostly by reduced productivity in Q1 2018 following the shutdown of EVRAZ NTMK's blast furnace no. 6 and the launch of blast furnace no. 7.      
In Ukraine, pig iron production decreased due to the disposal of EVRAZ DMZ in March 2018.
Crude steel output grew by 3.9% QoQ to 3 million tonnes following an increase in overall pig iron output.
Consolidated output of vanadium slag grew by 9.3% QoQ, which was in line with higher pig iron production.
 
 
 
 
 
 
 
 
Total sales volumes (RUSSIA, UKRAINE, KAZAKHSTAN and EUROPE)



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


H1 2018 / H1 2017, change




Coke*


73


110


-33.6%


184


303


-39.3%




Steel products, external sales*


2,598


2,586


0.5%


5,185


5,607


-7.5%




Semi-finished products*


1,202


1,303


-7.8%


2,505


2,932


-14.6%




   Slabs*


540


422


28.0%


962


1,118


-14.0%




   Billets*


538


763


-29.5%


1,301


1,418


-8.3%




   Other steel products*


123


119


3.4%


242


396


-38.9%




Finished products


1,397


1,283


9.0%


2,680


2,675


0.2%




   Construction products


806


735


9.7%


1,541


1,640


-6.0%




   Railway products


361


308


17.2%


669


666


0.5%




   Flat products


94


94


0.0%


188


110


70.9%




   Other steel products


136


146


-6.8%


282


259


8.9%




Steel products, inter-segment sales


174


129


34.9%


303


303


0.0%




Sales of third-party steel products,

external sales


247


170


45.3%


417


370


12.7%




Sales of iron ore products, external sales


508


585


-13.2%


1,093


1,416


-22.8%




Pellets


504


585


-13.8%


1,089


637


71.0%




Other


4


0


100.0%


4


779


-99.5%




Sales of vanadium final products***


3,348


3,108


7.7%


6,456


8,123


-20.5%



 Note. Numbers in this table and the tables below may not add to totals due to rounding.
* The Q1 2018 data have been updated due to adjustments in intragroup sales. In addition, the data for the following reporting periods have been restated: for Q1 2017, Coke = 113, Steel products, external sales = 2,720, Semi-finished products = 1,497, Slabs = 613, Billets = 757, Other steel products = 127; for Q4 2017, Coke = 273, Steel products, external sales = 2,878, Semi-finished products = 1,674, Slabs = 521, Billets = 960, Other steel products = 192. Other steel products include tonnes of pig iron.
*** in tonnes of pure vanadium
 
In Q2 2018, external sales of steel products were flat QoQ. Sales of semi-finished products fell by 7.8% QoQ, mainly due to lower sales of billets, reflecting a change in the sales mix in favour of slabs, which offered higher margins on export markets, and finished products.
 
Sales of finished products rose by 9.0% QoQ, driven by higher sales of construction products due to stronger domestic demand for rebars and sections.
 
Sales of railway products grew by 17.2% QoQ amid changes in the product mix at EVRAZ ZSMK's rail mill and higher demand from Russian Railways.
 
Sales of iron ore products decreased by 13.2% QoQ due to higher consumption by EVRAZ NTMK after the launch of blast furnace no. 7.
 
Sales of vanadium products grew by 7.7% QoQ, mainly due to sales brought forward from H2 2018 to Q2 2018 to take advantage of strong market conditions.
 



Cash cost, US$/tonne


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


H1 2018 / H1 2017, change




Slab cash cost (vertically integrated)


240


256


-6.3 %


248


254


-2.4 %




Iron ore products (Fe 62%)


35


38


-7.9 %


37


35


5.7 %



 
Average selling prices




US$/tonne (ex works)


Q2 2018


Q1 2018


H1 2018


H1 2017





Coke


244


264


255


215




Steel products


558


544


551


439




Semi-finished products*


482


439


462


344




Construction products


608


618


613


514




Railway products


687


720


702


632




Other steel products


643


628


635


524




Pellets


65


61


63


74




Metal Bulletin Ferro-Vanadium basis 78% min, free DDP,

consumer plant, 1st grade Western Europe**


69.15


61.90


65.53


26.16




Ryan's Notes N.A. FeV 80% min, US ex-warehouse, duty paid**


75.69


63.32


69.51


27.17



* includes prices for pig iron
** US$/kgV
 
In Q3 2018, the Group expects its pig iron production to decrease by roughly 8% due to scheduled capital repairs of EVRAZ ZSMK's blast furnace no.3 in August-November. In Q3 2018, pellet production at EVRAZ KGOK is expected to decrease by around 3.5% due to the scheduled repairs of indurating machine no. 1 in September-October.
 
 
STEEL, NORTH AMERICA SEGMENT
 
Production and sales volumes



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


H1 2018 / H1 2017, change




Crude steel


484


467


3.6%


951


860


10.6%




EVRAZ Pueblo


228


228


0.0%


456


412


10.7%




EVRAZ Regina


256


239


7.1%


495


448


10.5%




Sales of steel products


549


482


13.9%


1 031


943


9.3%




Construction products


72


69


4.3%


141


126


11.9%




Railway products


111


96


15.6%


207


206


0.5%




Flat-rolled products


162


142


14.1%


304


271


12.2%




Tubular products


204


175


16.6%


379


340


11.5%



* The Q2 2018 production and sales volumes data are preliminary.
In Q2 2018, crude steel production grew by 3.6% QoQ, primarily driven by improved utilisation at EVRAZ Regina due to unplanned downtime in the electric-arc furnace and caster in Q1 2018 not repeating.
 
Sales of construction products climbed by 4.3% QoQ and sales of railway products were up 15.6% QoQ, as a result of improved demand.
 
Sales of flat-rolled products surged by 14.1% QoQ due to stronger demand, partly driven by the impact of Section 232 import tariffs.
 
Sales of tubular products increased by 16.6% QoQ amid improved demand and favourable sales terms in small-diameter line pipe.
 
Prices for construction and flat-rolled products rose during the reporting period, reflecting higher prevailing prices for scrap and other inputs, reduced pressure from imports and improving demand fundamentals. Prices for tubular products decreased due to changes in the customer mix.
 
Average selling prices



US$/tonne (ex works)


Q2 2018


Q1 2018


H1 2018


H1 2017








Construction products


808


705


757


609





Flat-rolled products


978


781


886


784





Tubular products


1,200


1,243


1,220


999




 
In Q3 2018, crude steel output is expected to be slightly higher than in the prior quarter, while tubular product volumes should experience a 10-15% increase in volume, flat-rolled products should climb by 5‑10% and construction products should remain strong. Meanwhile, rail output is expected to fall by 5‑10% due to annual planned maintenance activities in Q2 2018.
 
 
COAL SEGMENT
 
Production volumes



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


H1 2018


H1 2017


H1 2018 / H1 2017, change




Raw coking coal (mined)


5,422


5,969


-9.2%


11,391


11,651


-2.2%




Yuzhkuzbassugol


2,755


2,720


1.3%


5,475


5,263


4.0%




Raspadskaya


2,430


3,008


-19.2%


5,438


5,957


-8.7%




Mezhegeyugol


237


241


-1.7%


478


431


10.8%




Coking coal concentrate (production)


3,389


3,631


-6.7%


7,020


6,231


12.7%




Produced at Yuzhkuzbassugol coal

washing plants


1,725


1,770


-2.5%


3,495


2,982


17.2%




Produced at Raspadskaya coal washing plant


1,664


1,861


-10.6%


3,525


3,249


8.5%



 
In Q2 2018, production of raw coking coal fell by 9.2% QoQ, primarily due scheduled transition of production at Raspadskaya mine from three to two longwalls. Additional effect was from the temporary longwall shutdown at the Raspadskaya mine in May 2018 to improve production safety at the developed longwall space.
 
Coking coal concentrate output fell by 6.7% QoQ, which was in line with lower production volumes of mined raw coking coal.
 
 
Sales volumes



Product, '000 tonnes


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


H1 2018 / Q1 2017, change




External sales*


2,885


2,713


6.3%


5,599


4,686


19.5%




Raw coking coal *


484


323


49.8%


807


933


-13.5%




Coking coal concentrate *


2,401


2,391


0.4%


4,792


3,753


27.7%




Intersegment sales


1,489


1,443


3.2%


2,932


2,884


1.6%




Raw coking coal


514


396


29.8%


910


606


50.0%




Coking coal concentrate


975


1,047


-6.9%


2,022


2,278


-11.2%



* The Q1 2018 data have been updated due to adjustments in the coal classification.
In Q2 2018, external sales volumes of raw coking coal surged by 49.8% due to the completion of a longwall repositioning at the Uskovskaya mine as its coal is in high demand. In addition, better weather conditions positively affected the raw coal shipments, as it may be difficult to unload the rail cars during the winter.
 
 
 



Cash cost, US$/tonne


Q2 2018


Q1 2018


Q2 2018 / Q1 2018, change


 H1 2018


 H1 2017


Q1 2018 / Q1 2017, change




Coking coal concentrate


48


45


6.7%


47


42


11.9%



 
Average selling prices



 
US$/tonne (ex works)
 


Q2 2018


Q1 2018


H1 2018


H1 2017




Raw coking coal


64


75


70


65




Coking coal concentrate


119


135


127


129



 
In Q2 2018, coking coal sales prices moved in line with global benchmarks.
 
In Q3 2018, semi-hard coking coal production is expected to increase slightly QoQ after launching a longwall at the Raspadskaya mine.




Notes:
Semi-finished products include slabs, billets, pipe blanks and other semi-finished products.
Construction products include beams, channels, angles, rebars, wire rods, wire and other construction products.
Railway products include rails, wheels, tyres and other railway products.
Flat-rolled products include commodity plate, specialty plate and other flat products.
Tubular products include large-diameter line pipes, ERW pipes and casings, seamless pipes and other tubular products.
Other steel products include rounds, grinding balls, mine uprights, strips, etc. They also include railway products for Ukraine.
 
 
 
###
 
For further information:
 
Media Relations:
London: +44 207 832 8998                               Moscow: +7 495 937 6871
media@evraz.com
 
Investor Relations:
London: +44 207 832 8990                              Moscow: +7 495 232 1370
ir@evraz.com
 
 
EVRAZ is a vertically integrated steel, mining and vanadium business with operations in the Russian Federation, Kazakhstan, US, Canada, Czech Republic and Italy. EVRAZ is among the top steel producers in the world based on crude steel production of 14 million tonnes in 2017. A significant portion of the Group's internal consumption of iron ore and coking coal is covered by its mining operations. The Group's consolidated revenues for the year ended 31 December 2017 were US$10,827 million, and consolidated EBITDA amounted to US$2,624 million.




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